Critical Access Hospitals Basics of Cost-Based Reimbursement
[Pages:19]Critical Access Hospitals Basics of Cost-Based Reimbursement
Jeffrey M. Johnson, CPA
Partner, WIPFLI August 2015
Basics of Cost-Based Reimbursement for Critical Access Hospitals (CAHs)
Objective of the discussion: To gain a high-level understanding of cost-based reimbursement for CAHs and it's impact on financial reporting
Discussion agenda: ? Provide understanding of differences in Medicare
hospital reimbursement methods ? Understand how CAHs get paid - (Interim rates
vs. final settlement) ? Understand the impact of cost-based
reimbursement on financial statement reporting
Medicare Overview
Medicare reimbursement depends on the services provided: Inpatient and swing bed services: ? Based on 101% of average cost per day for
inpatient services (as computed in the Medicare cost report): Paid on an interim basis using a per
diem rate for routine and ancillary costs Final settlement for each fiscal year
is based on the filed Medicare cost report after the intermediary completes their audit
Medicare Overview
Outpatient (OP) services: ? Based on 101% of cost to provide services to
Medicare patients (as computed in the Medicare cost report): Paid on an interim basis using a percentage of
Medicare charges Percentage calculated by dividing the overall
allowable Medicare costs by the overall Medicare charges, Medicare cost-to-charge ratio Final settlement for each fiscal year is based on the filed Medicare cost report after the intermediary completes their audit
Medicare Overview
Services often tied to a CAH that are not cost-based reimbursed: ? Freestanding clinics ? Professional component physician and non-
physician practitioners ? Hospital-based home health agencies ? Hospital-based skilled nursing facility ? Ambulance services (if not the only
local provider) ? Distinct part psych and rehab units ? Reference lab
Summary of Differences Between Prospective Payment (PPS) Hospital vs. CAH Reimbursement
Type of Service Inpatient OP procedures (Surgery, etc.) Lab
Radiology Other diagnostics Therapies Swing bed Ambulance service
OP clinics (Facility component)
PPS Hospital DRG APC
Fee schedule
APC APC Fee schedule MDS Fee schedule
APC
CAH 101% x Cost 101% x Cost
101% x Cost (Except for reference lab) 101% x Cost 101% x Cost 101% x Cost 101% x Cost Fee schedule (Unless only one within 35 miles, then cost) 101% x Cost
PPS vs. CAH Reimbursement
Type of Service OP clinics (Professional component) CRNA services
Outlier payments
Disproportionate Share Hospital (DSH)
PPS Hospital
CAH
Fee schedule
Fee schedule (reduced SOS)
(Reduced for site of and Method II Billing (if
service)
elected)
Fee schedule (Unless elect cost if less than 800 procedures per year)
Fee schedule and Method II Billing (if elected) OR elect cost if less than 800 procedures per year
Cost (Generally
N/A
insignificant for
rural providers)
Add-on to DRG
N/A
payments
PPS vs. CAH Reimbursement
Type of Service
Indirect medical education (IME) 72-hour rule (DRG window)
PPS Hospital
Add-on to DRG payment Applies
CAH N/A
N/A
Exempt units
Hold harmless provisions (For rural hospitals with fewer than 100 beds and Sole Community Hospitals (SCH)/Essential Access Community Hospitals (EACH))
Sequestration in effect reducing Medicare payments by 2% through 2025
Rehab units Psychiatric units
Applied through December 31, 2012
Limited to 10 exempt unit beds
N/A
Applies
Applies
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